9 comments:

I am suspicious. Why not expand mutuals in the private sector? Why only in public services?

Given that the second biggest market failure of our time (climate change is number one, naturally) has been the irresponsible actions of private banks, is it not more important to push for mutualisation of the nationalised banks?

There's little support for privatisation of public services, and what the right to bid for social enterprises will and does mean is that for-profit companies will be able to bid to run services.

Ooh you are so suspicious. Well, probably because with the private sector they have much less leverage, you can take a horse to water etc. You can't force the private sector to become mutual, and in some sectors it may not even be desirable. You CAN however encourage mutualism as, to be fair, the government has already done to some extent with legislation (e.g. the Co-op and Community Benefit Societies bill).

But, frankly, it's great that they're talking about it seriously even just for the public sector (which is around 50% of the economy, after all). This is the first time in years such things have been on the table.

Re the banks, I'm with you on mutualised solutions for nationalised banks, but that still is only a small proportion even of the UK banking sector, let alone the economy as a whole. I think is a diversion from the main opportunity - what we're talking about here is a massive sector and long-term programmes - so no, I'd say banks are not more important.

Although you might have to put tenders open to for-profit companies, as long as the stated objectives with which they have to comply are social as well as financial, and adequate safeguards are in place, why is that a bad thing - I mean, do we have to be dogmatic about it (he said, somewhat provocatively)? I'm all for a mixed economy - private where private works, cooperative where cooperative works.

Furthermore, if you include social as well as financial objectives, there's surely no reason why Co-ops shouldn't compete openly with companies. If we're saying that we need to shield the poor things from competing, that is surely not the best way to getting co-ops to be run well, and ultimately to getting the best deal for the public. The truth is that the BEST mutual organisations (John Lewis, CWS, Co-op Bank) ARE competitive, which I'm sure is why they're using John Lewis as an example.

Well, in that case you're arguing for a very revolutionary kind of politics, which I can't see working. There are reasons why this has never happened in any Western democracy - think about the practicalities: that companies now under private ownership would have to be first bought up by the government and then sold off again as a cooperative. In both the buying and the selling the company loses value, costing the government taxpayer's money. Or if you think there's another solution, I'd be interested in hearing it.

By the way, historically Labour has ALWAYS been in favour of a mixed economy which included private ownership, apart from perhaps a short period of Trotskyist infiltration in the 1970s. What it has always been about is countering effects of what economists call market failure, when the market alone gives undesirable outcomes (unemployment, poor healthcare, poor education).

Careful with your assertions: (i) competition necessarily hurts working conditions (ii) owners of companies are usually absent. Companies who operate without any kind of competition are usually hugely inefficient and therefore they are often strapped for cash rather than awash with it. Also, some of the best working conditions you will find in places which are not even unionised (e.g. Silicon Valley, which I've visited - they treat staff so well no-one even thinks about starting a union). In others unions form a necessary curb on over-zealous management. It's not so black-and-white.

Secondly, many if not most private company owners I'd say take a very close interest indeed in their companies and work pretty hard, I'm not sure why you think they leave the poor workers to earn them money while they fly off to exotic locations. (It's not always true in multinationals, I must admit.) Some are good managers, some are bad managers, but to say they're all plain bad is a cliché which doesn't do you justice - it sounds suspiciously like a "thin end of the wedge" argument against any kind of involvement of the private sector whatsoever, which generally means no acceptance of any kind of innovative solutions. I lived through the days when all public services were entirely public, and believe me, they were awful (read a history of the Winter of Discontent if you don't believe me).

Of course I agree with you that a system with no democratic content (i.e. accountability) would be bad, but what's being suggested here is just the opposite - public ownership and accountability but at the same time a requirement that the enterprise be efficient and competitive.

I still think it's a great idea based on the soundest of Labour principles.

Most private companies are owned by people who work alongside their employees. There's no particular problem with this - I've nothing against shopkeepers, but few of them are likely to be democrats in the workplace. And as a socialist... well, that's kind of what I believe there should be, and that's what we should work to encourage. That's kind of what the party was formed for...

Since most markets are dominated by a few major players, often multinational, usually unaccountable, we cannot really speak of free markets as you get in your economics textbook (lots of buyers, lots of sellers). So although there are lots of small employers in the private sector, their power is not as great as that of large multinational companies with the ability to spend lots of money on publicity, lobbying, etc.

There are additional costs incurred in increasing private involvement in public services - transaction costs, which are problematic in service delivery and likely to make it easier for subsidiaries of larger firms to win contracts.

It's likely that it will be large multinational firms, rather than small private companies, which will be able to "infiltrate" our public services.

It's true that Labour has aways been in favour of a mixed economy - but not for the past period of government, unfortunately. The failure to overturn the privatisations, to reverse the Tories great sell-off of utilities, has led us with obvious problems - the energy gap, fuel poverty, etc. So, a mixed economy in the proper sense would have a larger state and cooperative sector. This would threaten the power of the multinationals by providing competition - that's a good reason why economic democracy has not advanced far in Western democracies. Look at the effort Obama has had to go to just to get a very weak public option in his healthcare bill. The insurance companies have tremendous power - will they respect a limited entry into the NHS market?

My point about capitalists is not their manner - either good or bad - but the way competitive markets are structured and the resources which are devoted to operating competitive markets (transation costs, again). So it isn't about morality, but about how you must behave within a market situation to maximise your benefits.

You cannot deny that investment in our economy is largely dictated by profit-maximisation, which is why we must have public services provided by the state in the first place. So I don't understand how we could feasibly involve the private sector in the provision of services without it costing the taxpayer greatly.

You mention the industrial action that is now called the winter of discontent - of course services would have been bad then, there were strikes on! For service users at the point of delivery it might matter little who provides the serives - but the cost to the taxpayer does matter, as does transparency.

If we have more contracting out, we have more commerically confidential contracts - and therefore, less accountability as to what's being done with public money. This can be costly for a democratic society...

I think, if you don't mind me saying Rob, that you are a little naive about how capitalism works. The biggest cost is labour, so we have competition to reduce labour costs - of late, this has taken the form of offshore outsourcing which has done wonders for the people working in manufacturing(!)

I don't need to remind you that we are members of the party of Labour, not the party of capital. We should therefore focus not on allowing firms to make profits out of public services, but on improving public services and workers' rights. We can leave these costly privatisation proposals to the Tories or Liberals.

Well, the debate's getting more a bit more scientific now, so I'll respond in that vein. Your argument about transaction costs is informed and relevant, but misdirected, I'm afraid. Transaction costs do exist, but on the other side non-public entities often operate more efficiently which compensates. It's a trade-off between the two for costs. Sometimes public wins, sometimes private wins, sometimes it's a mixture.

I'd say best not to compare Obama's struggles with UK politics - the distortion which TV advertising money gives to the US political system gives far too much influence to big business. In the UK, thank God, business cannot buy influence in anywhere near a similar way. Compare average spending ($1m per Congress seat vs £8k parliamentary seat) to see why this is so.

"You cannot deny that investment in our economy is largely dictated by profit-maximisation" - of course it is, like practically every other democratic economy. But that doesn't mean that you can't bring in other objectives such as employment when we're talking about the public sector.

"So I don't understand how we could feasibly involve the private sector in the provision of services without it costing the taxpayer greatly." But this is a non-sequitur, as any economist can tell you. You are working on the assumption that public, private, mutual and mixed sectors are all equally efficient - they're not (although public can sometimes be more efficient, depending). This equation is precisely the debate which has dominated politics the world over during the 90s and 00s - how far non-state sectors (private, mutual, part-private) can be used innovatively while maintaining/improving levels of service. Insisting EVERYTHING has to be "pure" public - which is what I think you're proposing - is reigniting a debate which was largely over more than 20 years ago, across the globe.

Finally re outsourcing - what are you suggesting, that we put up trade barriers against movement of labour and projects across borders?

Best not to compare Obama's struggles with those in the UK? So multinationals here don't bother with lobbying politicians, publicity campaigns in the media? I take it you haven't noticed the bankers threats of economic vandalism if they are subject to increased taxation?

A democratic economy for me, and for most other people, isn't one where investment decisions are made by the few rather than the many, Rob.

We cannot think of efficiency as one thing - in the private sector, it means for the most part maximising the rate of return on investments. In the public sector it means making the best use of resources to deliver specified goals. Allowing profit-making companies into public services is a good way of guaranteeing corporate profits and trying to lessen the opposition of big business to our party - but ultimately the goals conflict, and there's little public support, much less support of our members and voters, for such measures.

With regards outsourcing - yes, I am suggesting that barriers should exist to a race to the bottom in terms and conditions. This is the ABC of Labour politics, no? There's little public support for a free market in labour and capital. Manufacturing decline has left our economy ever more dependent upon financial services concentrated in the South East - the effects of employers importing labour to undercut established terms and conditions, as in the Lindsay oil refinery despute, have the potential for igniting damaging social conflict. How you deal with this is increasing democratic control in the economy - there's no way workers in this country are in favour of sacking themselves so people can be employed elsewhere for less pay, worse conditions, and no trade unions.

I sense Rob that you've something of a distance from what ordinary people think about the economy. For policy-making elites, the thinking of big business might have been internalised - but the rest of us aren't blind to what conflicts with our interests.

It looks like it's true there is little support for the privatization of public services, and the right to bid for social enterprises and what it will cars mean is that for-profit companies will be able to bid for such services could run

I sense Rob that you've something of a distance from what ordinary people think about the economy. For policy-making elites, the thinking of big business might have been internalised - but the rest of us aren't blind to what conflicts with our interests. Informasi Dunia Kesehatan

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About the blogger

Activist, free thinker, Labour Party management team through 2001 and 2005 general elections, responsible for Labour's early web presence and creator of its first-ever national electoral register. Dad to two lovely little girls. Now work as project/programme/interim manager for an evil multinational, with a sideline in political commentary.

Politically think of myself as a loyalist (rather than a parrot). Member of Progress and the Co-op. My posts are vetted only by my, er, own sense of discretion and propriety. I've worked in business for many years, so have no truck with anti-business prejudice. Like social/ethical business, co-operatives and sustainability. Fought one general election and longlisted by NEC panel to be Labour candidate in 2010.